81 Information Management and Business Review Vol. 2, No. 2, pp. 81-91, Feb 2011 Micro Financing of NGOs and Government: Collaborative Impact on Poverty Eradication Rukhsana Kalim 1 *Taseer Salahuddin 2 1 University of Management and Technology, Johar Town Campus Lahore, Pakistan 2 University of Central Punjab, Jinnah Avenue, Johar Town, Lahore, Pakistan *superdoki1978@gmail.com Abstract: Poverty reduction has been declared as the most important millennium development goal not only by the world level organizations and institutions, but also by the government of Pakistan. Micro-credit is considered as a prime tool to fight back poverty. After the success of Grameen Bank of Bangladesh multiple other banks and micro finance institutions (MFI’s) like Banko Soladerio of Latin America, Indonesia’s BRI -UD, BAAC in Thailand, BRAC in Bangladesh and VBSP in Vietnam have been working on almost the similar pattern. In Pakistan different NGOs like AKRSP, Orangi pilot project, Kashf foundation and others have started working for the past few years basically to eradicate poverty and for women empowerment. The government institutions are also seriously making an effort to eradicate poverty through micro financing schemes. Government of Pakistan has selected the RSP (rural support program) model for micro-financing. The success of both government institutions and NGOs is not very outstanding to meet the basic objective of poverty eradication. The aim of this paper is to see the possibility of collaboration between the NGOs and the government to achieve the desired common goal. It is hypothesized that if government and NGOs work together and collaborate each other, the effectiveness of micro financing schemes could be strengthened. Keywords: Microfinance, Collaboration, Rural Support Programs, Poverty Alleviation. 1. Introduction Poverty reduction has been declared as the most important millennium development goal not only by the world level organizations and institutions, but also by the government of Pakistan. Poverty as per international definitions is either defined as number of people living under one dollar per day or people who can only take less than 2550 calories per day (adult) (Alam, 2005, Ziauddin, 1999, Gohar, 2000 & ADBP, 2005). Not only poverty reduction has been targeted rather after the success of Grameen Bank model, micro- credit has been given the prime importance as a tool to fight back poverty. Micro-credit is defined as the short term, small scale loans to the poor and needy to establish small enterprises to grow out of poverty (Chatterjee, 2001, Nanavaty, 2000, & Leon 1998). The idea of using micro-credit as a tool to eradicate poverty has received different reactions from researchers. Some are very much in favor of it (Leon, 1998, Amin, Becker and Bayes, 1998, Chatterjee, 2001, UN report, 1997, Cheston and Kuhn, 2000, Sharma and Zeller, 2000, Media cell PPAF, Kuramanalivia & Montgomary and Weiss, 2003) and many more. There are others who believe that micro-credit schemes whether government organized or NGO based are not fully successful due to certain shortcomings in the system and have suggested many ways to improve like, women participation should increase (Lapenu, 2000), effective screening and semi-joint ventures should be used (Diange, 2000), different models of reassessment should be used depending upon the country and region (Mohiuddin, 1993). Some researchers however, are totally against using micro-finance as a tool of poverty reduction due to not-very-successful results of the existing NGO’s and other MFI’s (Halme and Mosley, 1996, Waheed, 2002, Jayawardena, 2001, & Coleman 2001). Two main reasons for this poor performance of MFI’s are given. First it is either the lack of depth of these schemes in which core poor are left out due to corruption, lack of awareness or planning (Zeller and Sharma, 1998, Kuramanalieva, Montgomery and Weiss, 2003, Bajwa, 2002, Goheer, Montgomery and Weiss, 2005, & Ibrahim and Nayab, 1994). The second is the belief that there is always a decrease in social programs like spending on primary health, education and food due to diversion of funds towards micro-finance (Halme and Mosley, 1996 & Jayawardana, 2001). Solution to both these problems have been given by some is the flexibility of product designs and time of micro-finance (Burorjee, Deshpande and Weidmann, 2002, Sharma, 2000 & Mumtaz, 2000) while others have suggested some different strategies to make micro-finance